RIYADH, Feb 26 (Reuters) Saudi Arabia, which has recently stepped up a diplomatic drive to counter non-Arab regional power Iran, will host an annual Arab summit on March 28 and 29, Saudi media reported today.

Saudi Arabia, which has traditionally preferred to play a behind-the-scenes role in regional conflicts, said in 2006 it did not want to host an Arab summit this year, but the Arab League said in January Riyadh had changed its mind.

The gatherings of Arab leaders are convened annually and it was Saudi Arabia's turn to host the summit this year. Saudi Arabia did not give a reason for not wishing to hold the summit and its subsequent change of heart.

Al-Riyadh daily said King Abdullah had sent an invitation to Syrian President Bashar al-Assad, an ally of Iran whose relations with Saudi Arabia have cooled over the last year.

The leaders of all 22 members of the Arab League normally receive invitations, but often many do not attend, instead sending foreign ministers.

Saudi concern that Shi'ite Muslim Iran is extending its influence into Iraq, Lebanon and the Palestinian territories has been a key factor behind a high-profile Saudi diplomatic drive in recent months.

Saudi Arabia and other key allies of Washington, including Egypt and Jordan, want the United States to make serious efforts to mediate an end to the Israeli-Palestinian conflict which they see as central to radicalisation that Iran is able to exploit.

Diplomats in Riyadh speculate that Saudi Arabia may wish to revive an Arab peace initiative adopted by the Arab summit in 2002.

US and Israeli officials have recently spoken positively of the initiative.

The initiative envisages Israel returning land occupied in 1967, allowing a Palestinian state to come into existence, in return for diplomatic ties with all Arab states.

REUTERS SRS PM1812